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It may cost more to borrow in Franklin County
by Suzanne Rook, Wake Weekly Associate Editor
Losses in Franklin County's water and sewer department and a high debt load is expected to make it more expensive for the county to borrow money.
An expected drop in the county's bond rating -- a grade that reflects its current and future financial performance -- means it will cost more for the county to issue bonds, should commissioners decide that's how they want to pay for school construction. The county's total debt as of June 2003 is expected to be $52 million. Of that, $25 million covers school construction and renovations already completed. Franklin County currently has an 80 (out of a possible 100) or an A rating, according to the North Carolina Municipal Council. But county finance director Chuck Murray expects that rating to drop to a high B in the near future. Bond ratings help determine the interest rate with which bonds are repaid. Lower ratings translate to higher interest rates. Twice in the last six years, the county's bond rating has fallen. In March of 1997 the rating decreased from 82 to 81 based on what the municipal council said was the county's "rather high tax rate ’Ķ coupled with the additional rate for solid waste." The county's tax rate is 99.95 cents per $100 valuation. The rating dropped again in August 2001, to the current 80, due to what the council said was an increase in debt over the previous 10 years. "The county's per capita debt was among the highest," compared with similar-sized counties the council told Murray. In addition, the council cited the losses in water and sewer system operations as reasons for the ratings decrease. "The same issues are still ongoing," Murray said, explaining why he believes the rating will fall again. The board of education is expected to ask commissioners for additional monies in the coming weeks to pay for school construction needs. The board of education's facilities committee last month presented its members with a list of construction projects its believes is needed in the next 10 years. The entire $70 million proposal is divided into four phases. Immediate needs, according to the proposal, are $17.8 million in additions and renovations to the county's three high schools, to Terrell Lane Middle School and for 70-acres of land for a new southwest high school. But that only covers what the board of education believes it needs over the next three years. The board is expected to adopt the proposal at its April 14 meeting. Murray said the county could legally borrow as much as $50 million, but "can't afford to pay for it." A more realistic estimate would be $20 to 25 million. To entice investors, Murray said the commissioners could purchase insurance for any bond issuance -- if that's the route they choose to take. But Murray warned the insurance comes with an additional price tag: approximately $150,000. Another problem for commissioners -- repaying the debt with limited reserves and an already high per capita debt. "That's the hard part. Commissioners would have to raise taxes to pay for the debt."
Last Updated On: April 3, 2002
Copyright 2003 The Wake Weekly